Painting to Van Gogh.
Music to Mozart.
Writing to countless writer, Wilbur Smith, Alexander Solzenitzyn to name a few.
I write about economics, justice, equality.
Finding solution to a common problem.
Amartya Sen, Pramoedya Anantha Toer, I like their writing.

Tuesday, May 22, 2007

Some news reports say the new Trans-Peninsular Oil Pipeline 300km plus oil pipeline project between Kedah and Kelantan will cost RM25 billion. I am saying flatly that its not worthwhile and will do more damage to the country, people’s lives and the environment than any profit can possibly justify.

Let’s assume that the total cost is RM25 billion and everything goes smoothly and there is no cost overrun. Let’s assume that the project is funded by our EPF contributions. (Do you expect government to print money for this?)

Assuming that EPF requires a return on investment of 5% (makes the calculations easy), we would expect a net profit of RM1.25 billion annually. Wow! That’s a high hurdle rate! Add to this operational costs, damage to the environment and environmental risks associated with oil pipelines. Did I mention viability yet?

Why would oil tankers want to stop and unload in Kedah when they can go around Sumatra and enter the South China Sea through Sunda Straits as they have always done? Who benefits from this project? The rakyat? Absolutely not. It will be the Chinese, Taiwanese, Korean and Japanese if they use this facility at all.

Let me propose another form of investment that will benefit the country and the rakyat:

Lend RM100,000 to every poor Malaysian, so that they can use the money to improve their lives like starting businesses, building better housing, getting themselves educated, etc, or simply investing in trust funds like ASW.

Invest in electric energy production so that we can have cheaper electricity. This could be in the form of wind turbines on the hills or solar panels in every home.

Invest in better and modern water supply.

The same for waste water treatment.Fiscal expansion measures like this pipeline project would siphon funds from other better investment options. If the investment will directly benefit future production in food and other goods, then that will bring benefits in lower product prices in the future. But this is not so.

This pipeline project will not benefit the rakyat directly, but will benefit foreigners. So money for other investments will be starved to finance this pipeline project, there will be higher interest rates reducing investments which in turn will shrink future production resulting in higher inflation and prices.

Let scrap this project. Instead, let’s do fiscal expansion that will benefit future production in the country, which will result in cheaper prices (read competitive) for goods and services.

Did I mention about the rainforests and nature reserves yet? How many thousands of hectares of pristine forest that will have to be cleared up for this unnecessary oil pipeline project?